THE BIG EASY'S BILLION DOLLAR BOONDOGGLE

August 30, 2007

The idea of using federal money to rebuild cities is the quintessential liberal vision. And given the dreadful results in New Orleans, we can say that the government's billions spent so far represents the quintessential failure of that liberal vision, says Lawrence Kudlow, host of CNBC's Kudlow & Company.

Consider:

So far, the federal government has spent $127 billion (including tax relief) on post-Katrina New Orleans.

The entire gross domestic product (GDP) of the state of Louisiana is only $141 billion, according to the U.S. Department of Commerce.

If the relief money had been divvied up among residents, the $127 billion would come to $425,000 per person.

So the cash spent there nearly matches the entire state's GDP, says Kudlow. And to make matters worse, by all accounts New Orleans isn't even fixed. Further, according to an article by Nicole Gelinas at the Manhattan Institute:

New Orleans has earned the distinct honor of becoming the murder capital of the world.

The murder rate is 40 percent higher than before Katrina and twice as high as other dangerous cities like Detroit, Newark, N.J., and Washington, D.C.

Right from the start, New Orleans should have been turned into a tax-free enterprise zone, says Kudlow. No income taxes, no corporate taxes, no capital-gains taxes. The only tax would have been a sales tax paid on direct transactions. A tax-free New Orleans would have attracted tens of billions of dollars in business and real-estate investment. This in turn would have helped rebuild the cities, schools and hospitals. Private-sector entrepreneurs would have succeeded where big-government bureaucrats and regulators have so abysmally failed.